May 29, 2006

Managers often suffer from a chronic disease, which I call "Internal reference syndrome". While taking decisions and making strategies, they frequently look inside-out and often give scant regard to the outside-in view. The result is plans going haywire with increased frequency.

The inside-out view of the managers is based on the idea of external environment revolving around an organization. But the reality is quite different. Most often, the organization revolves around the external environment, except in a few cases of breakthrough ideas, products, or services that change the environmental landscape. So this inside-out view of things often blurs the reality and leads to decisions which ought not to be made.

This inside-out view plagues the organization in many ways. Following are some of them:

Missed opportunities: Looking from inside results in always trying to fit the world into the internal perspective. But many a time, big opportunities arise when businesses view their internal world from the spectacles of the outside world and then align themselves with the outside world. It’s like re-circuiting the internal wires to optimize the flow of energy and ideas inside a business. Continuous inside-out view tends to overlook the new environmental realities and might result in missed opportunities for the business.

Lack of holistic view: If you look out of the window of your house, the view of outside would be dependent on the length and breadth of your window. And even if there is a window large enough to occupy the wall of your house, the view of the outside world will still not be in entirety. Similar is the problem with inside-out view. Managers practicing inside-out view often don’t see the entire picture of their surrounding and pass judgments based on limited view of the world from their narrow internal windows. And this visual defect very often results in defective decisions that cost the business significant monetary loss apart from waste of time and resources.

Death of creativity: Inside-out view also kills creativity inside an organization. Managers hate to look beyond the obvious as long as the outside world somehow fits into their internal frame of reference. The inside-out approach is basically a process in rationalization rather than exploration. As a result, the creative zing is missing in a business where inside-out view is practiced.

Biased action: Decisions and resulting actions originating from an inside-out approach is often biased towards maintaining the internal equilibrium rather than adapting the business to the changing realities of the world outside. As a result, decisions and actions are never optimized for best results. They are optimized for conformity with internal frame of reference.

How to overcome this tendency to look at issues from inside-out framework?

Some proactive measures and a little bit of change in organizational circuitry can go a long way in ensuring that inside-out view is replaced by outside-in view. Given below are some ideas that may help in overcoming the inside-out approach to managing business:

Internal consultant: Perhaps the urgent need of the hour in every business is an internal consultant, who can bring some reality check as well as balance the inside-out approach with outside-in approach. He should be someone who is not emotionally attached to the existing systems and processes. He should take an outside-in view of the business and critically appraise it from all angles. Basically, he should be someone who can objectively study the organization from both outside-in and inside-out framework in a holistic manner and help the management in shaping strategy based on the business’ strengths as well as the changing realities of the outside world.

Learning organization: Creating a learning organization is another way to discourage inside-out thinking. Often it is seen that the managers become so occupied by running their businesses that they are rarely up-to-date with the trends – academic as well as professional – in their industry or their economic and social surroundings. Even in terms of professional skills and know-how they are seldom aware of the latest developments. All these ensure that they keep on living in past in a world that is changing every moment with new technology, new thinking, new approaches, etc. So the solution is simple and yet not so simple – you have to develop a learning organization that has the both the curiosity of a student and result orientation of a leader or a manager. This learning organization will also keep the organization constantly aware of its external environment thereby keeping it in sync with the world around which it revolves.

Internalization of best practices: From the concept of an internal consultant and a learning organization, a third concept – internalization of best practices – emerges that may help businesses beat the inside-out way of thinking. The combined effort of an internal consultant and a learning organization will result in accumulation of best practices from other industries, competitors, suppliers, etc. Whenever a business comes across a best practice, it should analyze it to find whether it can add value to it if internalized. Many of the best practices can be applied across industries after some modification and internalization. If a business constantly endeavours to internalize potentially value-adding best practices that it may come across, then over a period of time, a sense of heterogeneity will develop in its organizational DNA where “our way of doing” will give in to “the best way of doing”.

To sum up, in today’s world, when chaos and change are the name of the game, managers as well business leaders would do well to come out of the frog’s mentality of viewing the well as the start and the end of the world. Perhaps it is high time they should proactively start cultivating the habit of having a multi-dimensional outside-in view of their organization and business to create a synergy with the ever changing external environment. This will go a long way in ensuring their survival and sustenance.